Gold is headed for its largest weekly decline since mid-March as European nations begin to relax their lockdown measures, and while the US recorded its slowest daily increase in covid-19 cases for the month of April.
The gold price soared to a seven-year high in late March, with the performance linked to government responses to the pandemic. The precious metal benefited from an injection of cash from stimulus packages and uncertainties of the ensuing economic fallout led investors to pile in on safe haven assets.
During the first quarter, global investment demand for gold surged 80%, more than offsetting the steep decline in the consumer-driven sectors of the gold market.
The optimism that markets could begin to return to normalcy, however, has given investors more appetite for risk, sending the price of gold, which has historically been a safe haven asset during economic turmoil, on a gradual decline.
Spot gold closed below the $1,700/oz threshold on Thursday after hitting a fresh seven-year high earlier in the month. It has since recovered slightly, up 0.6% to $1,697.95 as of 12:30 pm EST on Friday. The metal is still set for its best month in nearly a year, but on pace for a 2% loss for the week.
Gold futures for June delivery gained 0.5% Friday after settling at $1,694.20 a day earlier.
The decline in gold price comes on the back of announcements made midweek by both the European Central Bank and the US Federal Reserve, with both committing to low interest rates and their current asset purchase programs.
“Gold is struggling to hold its move above its measured base objective at $1,700 and upside momentum is waning near-term,” said an analyst at Credit Suisse.
“You just have the risk-on sentiment from US equity markets … I think there’s some profit-taking in gold right now and a lot of people are getting repositioned for the next flight up in gold,” said Michael Matousek, head trader at US Global Investors.